Does Pre-K Count Towards Childcare Tax Credit?
Some parents map out their child's education from preschool to college based on their goals for the child's future and the quality of the schools. Many overlook the tax consequences of their choices. The childcare tax credit can help lower the income tax burden for families who choose to invest in Pre-K education for their young children.
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Requirements
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You must fulfill several general requirements to claim the childcare tax credit. For example, you must have earned income for the tax year, and you must have paid for childcare so you could work or look for work. You must name the childcare provider on your tax return, and the provider cannot be a dependent, such as an older child in the same family. You must file Form 1040, 1040A or 1040NR to claim the credit.
Filing Status
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You may claim the childcare tax credit if your tax-filing status is single, head of household, qualifying widow or widower with dependent child, or married filing jointly. If you are married, you must file your return under married filing jointly status to claim the credit. If you are divorced, you may claim the credit only if you are the child's custodial parent. If you are the custodial parent, you may claim the credit even if the other parent takes the dependency exemption for your child. The Internal Revenue Service considers the custodial parent to be the one with whom the child lived for the greatest number of nights during the tax year.
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Amount of Deduction
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If you qualify, you may deduct up to $3,000 from the federal tax you owe for childcare for one child who is under age 13 and up to $6,000 for two or more children. Your deduction may be less, depending on your income. The more you earn, the lower the percentage of your expenses that you can claim as a tax credit. At the time of publication, families earning more than $43,000 could deduct only 20 percent of their eligible expenses. There is no maximum income limit for families that claim the tax credit.
Preschool Expenses
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Preschool, nursery school and Pre-K programs qualify as providers under IRS regulations. You may include preschool tuition for your child when you calculate your childcare tax credit. The IRS considers the amount these programs charge for lunch and educational activities to be incidental to the amount they charge you for caring for your children. Conversely, expenses for grades kindergarten and above are considered educational expenses that do not count toward the childcare tax credit.
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References
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